Pricey Shendra mystery & its Future Generali pie

Foreign direct investment (FDI) may remain a sore political issue, but an existing joint venture seems to have circumvented extant regulations through a complex web of shareholding. Shendra Advisory Services Pvt Ltd, a shell company, owns a 49% stake in Future Generali IndiaInsurance Company Ltd, the non-life insurer promoted by the Kishore Biyani-led Pantaloon Retail Ltd.

The balance stake is owned by Pantaloon Retail Ltd and Maatschappij Graafsschap, both owning 25.5% apiece and shares were issued to them at face value of Rs10 each share. Shendra has no employees on record and shares the same office address as Pantaloon Retail, while the official email id given is that of Future Generali’s company secretary.

From inception in 2005-06 till the last fiscal, Shendra has posted a loss, while its annual income never crossed Rs1 lakh barring in 2007-08 when it touched Rs3.45 lakh.

Despite such a track record, Shendra got a premium of Rs2,490 per share from Maatschappij Graafsschap, a company based in Holland, for its stake. The only underlying asset of Shendra is the 49% equity that it holds in Future Generali Non-Life for which Maatschappij paid an astronomical premium of Rs2,490 per share.

And guess what, Maatschappij’s 25.5% direct stake in Future Generali was bought only at the face value of Rs10 each share.

For same underlying asset (stake in Future Generali non life) how come Maatschappij paid different amount could not be ascertained as an email sent to Maatschappij bounced back.

According to Bloomberg Businessweek Maatschappij Graafsschap Holland NV, was founded in 1975 and is based in Diemen, the Netherlands. It is a unit of Assicurazioni Generali SpA.

Between 2007 and 2011, Shendra issued shares to Pantaloon Retail (India) and Pantaloon Industries at a face value of Rs10, while for subscribing Shendra’s shares, Maatschappij paid a whopping Rs2,500 per share. As of March 31, 2012, Maatschappij and Pantaloon Retail both have invested Rs127 crore each in Shendra, but Maatschappij owns just 0.4% stake, thanks to the astronomical high premium paid by it for each Shendra share.

Meanwhile, Pantaloon holds 99.96% stake in Shendra since it got shares at a face value of just Rs10. Now talk is that Pantaloon Retail is negotiating to offload its stake in Future Generali. Whoever buys the stake will be de facto buying the stake of Shendra. What the valuation would be is moot.

As per the memorandum of understanding of Shendra, its main function is to give advisory services in the infrastructure sector. So, how it got involved into investment in insurance business could not be found out as a DNA Money questionnaire seeking clarification on the issue and the premium paid to Shendra remained unanswered by the Shendra management.

The pricing of the Shendra stake happened even as former Sebi chairman G N Bajpai headed the joint venture board. Deepak Sood, the current CEO of Future Generali Life, was the CEO of the non-life business since inception till 2009.
Sood had refused to speak with DNA Money on the structure of Future Generali Life. K G Krishnamoorthy Rao, the current MD and CEO of the non-life business, joined Future Generali as chief underwriter in 2007 – the time when the share pricing scheme was implemented. He came from Bajaj Allianz General Insurance.
Girish Kulkarni, former head of Pantaloon Retail Financial Services, along with the promoters of Future Generali, are said to have arrived at the pricing structure.

Kulkarni was chief marketing officer of SBI Life and AMP Sanmar from where he joined as head of Pantaloon Retail Financial Services. He later shifted to the Asian headquarters of the company in Hong Kong from where he moved on to the Generali office in Dubai. Kulkarni is currently MD and CEO of Star Union Dai-ichi Life Insurance company Ltd.